Brazilian Tax Review – September/October 2016

NEW LAW GOVERNS INCENTIVES FOR ANGEL INVESTORS IN STARTUPS

Supplementary Law 155/2016 sets forth new provisions to govern legal aspects related to the capital contributions made by angel investors in startups. Under the new law, Microenterprises (ME) and Small Businesses (EPP) can receive capital contributions from individuals or legal entities (including investment funds), and these contributions can be kept separate from the company's share capital. Thus qualified, angel investors can invest in projects without joining the corporate structure of the company invested in and the company's activity will be conducted solely by the owners.

This new relationship must be governed by a participation agreement, with guidelines determined by law.

It is important to emphasize that these contributions are not considered revenue for the companies invested in and do not affect the limits for the Simples Tax method.

The new rules take effect on January 1, 2017.

THE SUPREME COURT HOLDS THAT OVERPAID ICMS-SUBSTITION TAX MUST BE REFUNDED TO RETAIL STORES

The Supreme Court issued a decision holding that Brazilian States must refund taxpayers for ICMS (State VAT) collected under the tax substitution method when the final sale price is lower than the presumed amount used for the tax calculation basis.

Under the ICMS-Substitution system, the first link of the commercial chain must pay the ICMS (VAT) due on the subsequent transactions based on a presumed calculation basis. Before the new Supreme Court decision, retailers could not be refunded for the overpaid ICMS in cases where the actual retail price was lower than the presumed basis. This has now changed with the new Supreme Court decision, even though there are still questions about the concrete effects of this decision.

Since the appeal was decided under the general repercussion system, this holding is binding on all future cases.

ARGENTINA AND BRAZIL ARE TESTING A SYSTEM FOR ISSUING DIGITAL CERTIFICATES OF ORIGIN

Brazil and Argentina have implemented a system for a three-month test to issue digital Certificates of Origin, which are documents used to attest the origin of products in order to allow them to benefit from preferential trade tariffs. Customs authorities in both countries selected importers and exporters to take part in the pilot project.

The system is intended to reduce the amount of paperwork, costs and time necessary to issue certificates of origin.

BRAZIL SIMPLIFIES EXPORT PROCEDURES FOR...